In its latest quarterly survey of consumer services firms, published today, the bosses’ organisation found activity had slumped at the fastest rate since 2001.

It is the first in a series of economic indicators being published this week that are expected to show confidence has deteriorated in the face of tighter credit and higher util­ity, food and fuel costs.

The CBI said profitability in businesses such as hotels, bars, restaurants and cinemas, had slumped to their lowest level for at least 10 years, affected by low spending and higher costs.

Travel companies, the only firms to report growth in business during the past three months, were also hit by soaring costs and reported their lowest profitability for five years. However, although holiday operators were finding it difficult to pass on higher prices to consumers, busi­nesses in other sectors were increasing their charges.

The CBI’s chief economic adviser, Ian McCafferty, said companies in the services sector were concerned about their prospects, although he added: “People are more inclined to take a well-earned break as rising costs put greater
demands on household spending.”

Companies providing services to businesses, such as lawyers, accountants, IT and recruitment firms, said they were less affected by the downturn and enjoying some growth, although they said profits were flat.

Global Insight’s chief UK and European economist Howard Archer said the CBI’s distributive trades survey, which covers retail, was likely to show consumer confidence had slumped still further when it published this Thursday.

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